Queensland quarterly resources snapshot launched

The Queensland Resources Council has launched its first quarterly report of key data charting the performance of the State’s minerals and energy sector.

Launching the State of the Sector March quarter report at a business forum in Brisbane, QRC Chief Executive Michael Roche said it was important that more Queenslanders become more familiar with the performance and outlook for the resources sector.
“With data confirming that the sector directly and indirectly contributed $41.3 billion to Gross State Product and employed more than 191,000 people in 2007-08, every Queenslander has a stake in the future of the resources sector,” Roche said.
“Minerals and energy production is the cornerstone of the State’s economy and through this quarterly report, we’re planning to bring the sector’s performance and outlook into sharper focus.”
The inaugural State of the Sector quarterly introduces the QRC production index and QRC price index, which will track the collective performance of Queensland’s major resource products - bauxite, alumina, aluminium, coal, copper, gold, lead silver, zinc, oil, gas and electricity - against a June 2006 baseline.
Other indicators including input costs, capital expenditure and minerals exploration have been incorporated into the report along with a snapshot of the sector’s socio-economic contribution and its response to the global financial crisis.
“The next edition of the State of the Sector covering the June quarter will also contain a Chief Executive’s sentiment index that will provide a forward-looking insight into the issues occupying the minds of industry leaders in Queenslanders,” Roche said.
The QRC production index is a weighted index that tracks percentage increases and decreases in the production of Queensland’s major resource products. With June 2006 as the base period (ie=100) the QRC production index in the March 2009 quarter is projected to reach 91 index points because of global conditions, and particularly, reduced demand.
Between June 2008 and March 2009, production decreased by 17 per cent. The timing and speed of global economic recovery remains uncertain.
The QRC price index uses the same basket of goods as the QRC production index, and in the March quarter 2009 is projected to reach 204.
Between June 2008 and March 2009, prices increased by 81 percent, largely on account of strong (contract) coal prices and a low Australian dollar. However, significant decreases in most other resources were recorded.
Looking beyond the March 2009 quarter significant decreases in the index are expected, especially from April 2009 as coal contract prices are renegotiated (particularly with Japanese customers). There are also projections that the Australian dollar might recover slightly.
According to the report, coal mining input costs at the end of 2008 were at an all-time high. Post-2003 increases (51 per cent for open cut, 40 per cent for underground) reflected the scarcity of inputs.
Increased charges by State Government-owned corporations are also contributing to cost pressures ahead of the Federal Government’s proposed Carbon Pollution Reduction Scheme, for which the coal industry and some other trade-exposed industries have been excluded from transitional assistance.
Mining capital expenditure increased from $1bn to $1.5bn between the September and December quarters in 2008.
The report said that indications are that the majority of the $10bn-plus in resource projects either “under construction” or “committed” in Queensland before the global slowdown will continue largely as planned.
However, it also reported that junior companies are facing difficulties raising capital in equity markets while mid-tier and major mining companies are taking all measures necessary to preserve cash flow.
In the December 2008 quarter, exploration expenditure in Queensland decreased 13 per cent to $94.9m. This trend is expected to continue well into 2009 with exploration expenditure down a forecast 44 per cent by June to $54m.
Compared with the rest of Australia, Queensland’s share of overall exploration expenditure continues to decrease. In 2005, Queensland had approximately 20 per cent of national expenditure. In December 2008, this had dropped to a low 14.6 per cent.
Latest estimates from the International Monetary Fund (IMF) show that the economies of Australia’s major trading partners will slow significantly in 2009, but with some recovery predicted in 2010.
Japanese imports of Australian thermal coal are expected to remain relatively constant with demand for most other resources decreasing in the short to medium ter as Japan’s economy endures a significant slowdown.
While no-one is confidently predicting an end to the slowdown, Government efforts globally to stimulate their domestic economies through aggressive fiscal and monetary policies are seen as critical to restoring consumer and business confidence.
The report said that Queensland resources sector companies have responded to the global slowdown in the following ways:
. reduced production that has necessitated reduced staffing
. re-evaluation of economic mine lives (care and maintenance, some closures)
. deferred uncommitted capital
. re-evaluation of timing and costs of some export infrastructure projects
. reduced exploration expenditure
. cost focus on maximising margins and conserving cash resources
. continuing to work on advanced projects to ensure start-up is possible when markets improve.